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Briefing

Commercial Paper

Appears in: North America, United States, Corporate Bonds and Leveraged Loans, Money Markets

Background:

Government guarantees and commitments to not let any counterparty fail is showing  the desired impact in interbank and money markets, but it distorts somewhat the character of the purely unsecured lending quote among banks. One important activity indicator is the issuance of unsecured short-term commercial paper with which financial and non-financial companies fund their day-to-day operations. As of July 29, 2009, total outstanding (seasonally adjusted) was down from US$2.2 trillion in August 2007 to US$1.06 trillion, lower than 2003 levels. Outstanding is still declining, although asset-backed commercial paper (ABCP), one of the "shadow banking" funding sources, stabilized at US$437 billion - a third of its peak volume in 2007. The Fed's commercial paper lending facility declined to US$124 billion as of June 24, 2009.

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